Absence Of Term “Seat” In Arbitration Clause, Exclusive Jurisdiction Can Be Derived From Intention Of Parties: Delhi High Court Dismisses Section 11(6) Application

Brief Facts:

Sanjay Kumar Verma (“Petitioner”) was appointed as a Team Leader by Planning And Infrastructural Development Consultants Pvt. Ltd. (“Respondent”) in a Letter of Appointment (“LoA”) for a specific project in Uttar Pradesh, with a fixed monthly remuneration. Despite completing his tenure, the Petitioner was not paid for the final three months and left the project site after fulfilling all obligations. Subsequently, a series of communications ensued between the parties' lawyers, leading to the Petitioner filing a civil suit in the Principal District and Sessions Judge Court, seeking recovery of dues. In response to the suit, the Respondent filed an application under Section 8 of the Arbitration and Conciliation Act (“Arbitration Act”) in District Court, seeking arbitration as per Clause 13 of the LoA, which stated that disputes shall be referred to an arbitrator chosen by the company, with jurisdiction in Patna. The District Court allowed the Respondent's application and directed the parties to arbitration. Thereafter, the Petitioner filed an application in Delhi High Court (“High Court”) under Section 11 of the Arbitration Act for the appointment of an arbitrator, while the Respondent objected to it and argued that the High Court didn't have jurisdiction, citing the clause specifying "Patna jurisdiction."

The Petitioner argued that the mention of Patna jurisdiction in the LoA does not determine the 'seat of arbitration' by mutual consent. He contended that since the parties did not explicitly decide on the seat, the High Court held jurisdiction according to Section 2(1)(e) of the Arbitration Act. Referring to the principles of the Code Civil Procedure (“CPC”), the Petitioner asserted that the cause of action arose in Delhi, where the Respondent conducted business. Additionally, he relied on Section 42 of the Arbitration Act, stating that as a previous Section 8 application was filed in Delhi courts, the High Court should handle the Section 11(6) petition.

Observations by the High Court:

The High Court held that the parties have the autonomy to mutually decide the place of arbitration and emphasised that the determination of the seat confers exclusive jurisdiction upon the courts at that location. The clause in the LoA unequivocally stated that disputes would be subject to the jurisdiction of Patna, Bihar.

Upon analyzing the language of the arbitration clause, the High Court concluded that it signified a mutual agreement designating Patna as the place of arbitration. Despite the absence of the explicit term 'seat' in the clause, the parties' intent to establish Patna as the arbitration venue was clear. This interpretation aligned with the principle of party autonomy enshrined in Section 20 of the Arbitration Act, which mandates honouring the parties' consensus on such matters. Therefore, the High Court determined that Patna was indeed the designated seat of arbitration, depriving it of jurisdiction to adjudicate the petition.

The High Court noted that Section 20 of the Arbitration Act underscores the autonomy of parties in determining the place of arbitration, a crucial aspect despite the Act's absence of the term 'seat of arbitration.' The High Court underscored exclusive jurisdiction in courts at the designated seat to oversee arbitration proceedings and preclude other courts from interfering.

The High Court noted that the language of the arbitration clause explicitly stated that disputes would be referred to an arbitrator chosen by the company, with Patna jurisdiction. This wording indicated a mutual agreement, placing arbitration proceedings squarely within Patna's jurisdiction. Despite the absence of the term 'seat' in Clause 13, the High Court held that the agreement unambiguously designated Patna as the place or seat of arbitration. Therefore, the High Court held that there was an explicit agreement stating Patna as the seat of arbitration, thereby conferring jurisdiction upon the court in Patna to appoint an arbitrator under Section 11(6) of the Arbitration Act. The High Court distinguished the case from the cases where the seat remained undefined or subjected to the general supervisory roles of certain courts.

Furthermore, the High Court dismissed the Petitioner's reliance on Section 42 of the Arbitration Act, stating that subsequent applications under Section 42 could not be filed in the civil court dealing with the arbitration agreement. Ultimately, based on the clear designation of Patna as the seat of arbitration in the LoA, the High Court concluded that it lacked jurisdiction to appoint an arbitrator under Section 11(6) of the Arbitration Act.

Case Title: Sanjay Kumar Verma vs Planning And Infrastructural Development Consultants Pvt. Ltd.

Case Number: ARB.P. 1164/2022

Advocate for the Petitioner: Roop Singh

Advocate for the Respondent: Shekhar Kumar

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